Asian Base Oils meeting review

The ICIS Asian Base Oils & Lubricants conference in Singapore on 26-28 June proved a lively forum for discussion of regional market and industry developments

JOHN BAKER ICIS LONDON
The big news from the ICIS Asian Base Oils & Lubricants meeting in Singapore on 26-28 June was that major player ExxonMobil will boost its global Group II base oils supply with a new multi-billion dollar expansion project at its integrated manufacturing facility in Singapore.
The company will make a final investment decision on the new project next year, with start-up expected in 2023, Ted Walko, Exxon-Mobil’s global marketing manager for its base stocks and specialties marketing unit, told ICIS at the event.
“We’ve completed a fair amount with the project development and design, and the front-end engineering work is still progressing, so a fair amount of work will be required until we get to that final investment decision. But we feel strong enough about where we are heading and the opportunities it presents,” he said.
“It will be our biggest base oils investment [to date],” Walko added on the sidelines of the conference.
PROPRIETARY TECHNOLOGY
The new project will introduce a new high viscosity Group II base oil into the marketplace, he said. “It’s a new and proprietary technology, and we believe from a cost-of-base-stock standpoint we will be in a superior position to all our competitors.”
The new grade of Group II base oil will allow customers in the Asia-Pacific area to cost-effectively blend a wide-range of finished lubricants, according to an ExxonMobil statement. ExxonMobil will continue to produce its AP/E CORET Group I base stocks at its Singapore refinery, the statement added.
The Singapore refinery expansion project will also result in the production of more clean fuels with lower sulphur content, including ExxonMobil marine fuels that comply with the International Maritime Organization’s 0.5% sulphur cap to help customers continue to meet the reduced sulphur limit, according to the company.
ExxonMobil produces 44,000 bbl/day of lubricant base oils at its Singapore production site and is currently expanding the Singapore refinery to upgrade production of its EHC Group II base oils. Construction of the upgrading project began in 2017 and commissioning is expected by early next year, Walko said.
Elsewhere, the company is “on target, on track and on time” for its hydrocracker expansion project in Rotterdam, the Netherlands, which adds production capacity of EHC 120 base oils, he said. The project is expected to start up by the end of this year, with product availability expected in 2019.
Demand growth for base oils in Asia is expected to be “just shy of 1% a year,” which is higher than those seen in Europe and North America, Walko said. “North America and Europe are really capturing the benefits of higher performance lubricants so their growth is not as robust,” he said.
As for China, Walko said that the Asian giant – a net importer of base oils – will continue to demand greater and improved quality of Group II base oils as they head for higher sustainability goals, he added.
Paul Nai, director of product management at Lubrizol Southeast Asia told delegates that lubricant oil demand from passenger car use in Southeast Asia will grow at an average of 2.6%/year between 2016 and 2021, supported by strong growth in Indonesia and Thailand.
Indonesia’s lubricant demand for passenger car and heavy duty engine oils will grow from 371,000 tonnes in 2016 to 401,000 tonnes in 2021. For Thailand, lubricant demand is expected to rise to 293,000 tonnes from 260,000 tonnes during the same period, said Nai.
Around 15.9m vehicles were sold in Southeast Asia last year, mostly in Indonesia and Thailand, according to Nai. The figures includes 12.6m motorcycles, 2.04m passenger cars and 1.05m commercial vehicles, he said.
The move to more advanced emission control levels in Southeast Asia could weigh on lubricants demand, as it will require better lubricant technologies, Nai added.
“Advanced emissions control adoption is growing… over the last five years, Vietnam, Thailand and the Philippines have moved to legislation for new vehicles based around the EU’s Euro 4 and Euro 5 standards.”
In Indonesia, the largest lubricant market in Southeast Asia, Euro 4 emissions are proposed to come into force for new passenger cars and commercial vehicles in 2021, and this will impact demand and types of lubricants used.
INDIAN IMPORTS STRONG
Turning to developments in India, Shailendra Gokhale, managing partner at Rosefield DAA International Consultancy, said the country will continue to be a heavy importer of base oils in the considerable future. Demand will far outstrip India’s domestic capacity, with a lack of new start-ups.
The country’s net requirement for base oil imports was around 1.22m tonnes last year, with domestic demand for the material at 2.45m tonnes and domestic production capacity at 1.23m tonnes. There has been no new capacity announced so far by Indian base oil refiners.
This is a “great opportunity for overseas base oil suppliers, as India’s capacity remains extremely short”, said Gokhale. “There is scope for new lubricants players, since India’s appetite and buying power for quality products only grows.”
India’s Group II base oil demand now stands at about 2.1m tonnes, serviced by both local producers and imports, Gokhale said. This demand is expected to grow by 6-8% in line with market growth and amid the marginal shift from Group I to Group II base oils.
“Currently, India market is dominated by South Korean and Singaporean suppliers, but base oil suppliers from [the] Middle East and even the US are trying to improve their footprint,” Gokhale added.